First Thing Today | March 7, 2022

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Good morning!

Wheat opens the week limit up... The most actively traded winter wheat contracts are up their new 85-cent daily trading limit (see next item), while May and July spring wheat futures are up their 60-cent limit. Corn and soy complex futures are also sharply higher to open the week. As of 6:30 a.m. CT, corn futures are trading mostly 16 to 18 cents higher and soybeans are 17 to 31 cents higher. Front-month U.S. crude oil futures are more than $5 higher and topped $130 earlier overnight. The U.S. dollar index is more than 200 points higher after reaching the highest level since May 2020 overnight.

CME Group raises SRW, HRW wheat daily trading limits... The normal daily trading limits for SRW and HRW wheat futures traded at the Chicago Board of Trade have been increased to 85 cents, up from 50 cents previously. The daily limit after a limit-up close the previous day will expand to $1.30. The new limits will remain in place until the exchange conducts its next semi-annual reset in May.

Russia/Ukraine update... A third round of talks between Russia and Ukraine on ending the war will be held in Belarus today as fighting between the two countries continues. Meanwhile, Russian Foreign Minister Sergei Lavrov and Ukrainian Foreign Minister Dmytro Kuleba plan to meet on the sidelines of a diplomatic forum in Turkey on Thursday. Last week the two sides agreed to open humanitarian corridors to allow civilians out of some combat zones, but that hasn’t worked so far, with both sides accusing each other of violating local ceasefire.

U.S. in talks with Poland over shipment of fighter jets to Ukraine... U.S. Secretary of State Antony Blinken indicated Sunday the U.S. is in active discussions with Poland to backfill its fleet of planes if it supplies Ukraine with fighter jets. Meanwhile, Russia’s Defense Ministry on Sunday warned that any country that offers the use of its airfields to Ukraine’s military for attacks on Russian assets could be considered as having entered the conflict. “The use of the airfield networks of these countries to base Ukrainian military aircraft and their subsequent use against the Russian armed forces may be regarded as the involvement of these states in an armed conflict,” Russian Defense Ministry spokesman Igor Konashenkov told the Interfax news agency on Sunday evening. Konashenkov said Russian officials are aware of “Ukrainian combat plans which earlier flew to Romania and other neighboring countries,” without elaborating.

U.S. may withdraw preferential trade status for Russia, Belarus... Following Canada’s lead, the U.S. is considering withdrawing the preferential trade treatment of goods from Russia and Belarus for their involvement in the invasion of Ukraine. Canada recently revoked Most Favored Nation (MFN) status for both countries and put a 35% tariff on their imports. Canada is the first country to impose trade sanctions on Russia and Belarus, which let Russian President Vladimir Putin use it as a staging area for the invasion. Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Ranking Member Mike Crapo (R-Id.) support repealing Russia’s permanent normal trade relations (PNTR) status, and in the House, Ways and Means Committee members Lloyd Doggett (D-Texas) and Earl Blumenauer (D-Ore.) will introduce legislation that strips Russia of PNTR and calls for revoking that country’s membership in the World Trade Organization. The European Union also will consider ending Russia’s MFN status. Additionally, the U.S. and several other countries, including Canada, the EU and the United Kingdom, have restricted various products from being exported to Russia.

Chinese soybean imports increase in the first two months of 2022... China imported 13.9 MMT of soybeans in January and February, up 4.1% from the first two months of last year. The imports were larger than expected and don’t match up with the tightness in supplies reported by crushers, according to China-based consultancy Mysteel.

China’s exports, imports slowed in January/February... China’s exports rose 16.3% in the first two months of the year versus the same period a year earlier, beating analyst expectations for a 15.0% rise, but down from 20.9% gain in December. Imports increased 15.5%, easing from a 19.5% gain in December and below the forecast 16.5% increase. That increased China’s trade surplus to $116.0 billion from $94.5 billion in December. China’s trade surplus with the U.S. stood at $59.8 billion in the first two months of the year.

U.S. to begin review of tariffs on $300 billion of China Imports... The review is on the duties first imposed by the Trump administration in July 2018. It will be on the first group of tariffs on more than $300 billion in Chinese imports needed to prevent their expiration, a process likely to bring new scrutiny of their effectiveness as inflation runs at a four-decade high. The evaluation, officially known as a “review of necessity,” so far has attracted little attention.

AgRural further cuts Brazilian soybean crop estimate... The Brazil-based consultancy now estimates Brazil’s soybean crop at 122.8 MMT, down from 128.5 MMT in early February. AgRural estimates Brazilian corn production at 110.9 MMT. USDA will update its Brazilian crop forecasts on Wednesday and Conab will release its revised official crop estimates on Thursday.

The week ahead in Washington... Congress must come up with a spending package for fiscal year 2022 by Friday when the latest (third) continuing resolution expires. The White House wants to add $22 billion in Covid aid to the legislation besides supplemental funding for Ukraine, but there are political party differences on the Covid request. The Supreme Court will again consider whether to hear California’s Proposition 12 case, with an announcement on that possibly today. The biggest economic report to watch this week will be the monthly read on consumer prices, which will be released on Thursday. USDA will release its March Supply & Demand Report on Wednesday in which the key question will be how much extra domestic usage USDA plugs into its 2021-22 balance sheets to reflect shipping disruptions in the Black Sea region and supply shortages in South America.

China’s meat imports plunge in first two months of 2022... China imported 1.1 MMT of meat in January and February, down 33% from the same two-month period last year. An increase in domestic production, especially pork, curbed demand for meat imports.

China to buy more pork for state reserves... China will buy 38,000 MT of pork for state reserves on Thursday. Beijing started buying domestic pork for state reserves last week to support falling hog prices.

Bears have strong upper hand in cattle... Cattle futures finished well off session lows last Friday, but bears have the strong upper hand coming into this week. While futures are oversold and due for a correction, demand concerns persist amid inflated consumer prices and economic consequences from the Russia/Ukraine war. That keeps short-term downside risk open and likely limits the upside to short bouts of corrective buying.

Hogs signaling a top... Hog futures finished poorly last Friday, sending stronger technical signals of a top. In addition, the CME lean hog index is down 13 cents today (as of March 3), the second straight decline, signaling the cash market have posted a late-winter top. As a result, followthrough selling in hog futures is likely to kick off this week.

Weekend demand news... Taiwan tendered to buy 50,000 MT of U.S. milling wheat. Tunisia tendered to buy 125,000 MT of soft milling wheat and 100,000 MT of feed barley – both optional origin.

Today’s reports

 

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